Hello,
I had a quick question in relation to Capital Allowances.
I have just purchased a computer for business purposes through my Ltd company for £1900. If I am correct in my thinking we take this to the fixed assets register and then write it down over a 3 year period claiming capital allowance each year on the deprecation amount? If it was under £1000 we could have written down 100% by using the annual investment allowance scheme. Either way over the life time of the computer I would save 20% in a corp tax reduction.
Now my question is this, if I was self-employed and I was completing my self-assessment and can already see that I am in a 40% income tax bracket would I potentially save 20% tax like the limited company above or would I be saving 40% as I am currently in the 40% income bracket.
Hope some on can help.
Jason
Replies (5)
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Capital allowances
... are a deduction from your trading profits, so you get relief at whatever rate of tax you pay on your trading profits.
Why do you think that the 100% AIA can only be cliamed on capital expenditure of under £1,000? It can be claimed on up to £500,000 of expenditure on plant and machinery (assuming that the Budget increase passes into law - £250,000 if not).
Tax Savings - Self Assessment or through Ltd Company
Yes - assuming you have a company which pays tax at the small company's rate (20%) and the transaction is routed through the company.
If the transaction is routed through as a self employed individual, if you are on the higher tax rate say 40%, then your tax saving will be at 40% in the first year.(when you file a claim as part of your self assessment calculation).
Hope this helps
SD